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Myriad Group Announces Fiscal Year 2010 Results
Revenues USD 101.0 million / Gross profit USD 67.3 million, gross margin 66.7% / EBITDA (before restructuring charges and extraordinary income) USD 11.3 million
- Extraordinary gross income of USD 19 million as a result of sale of IP
- Net result negatively affected by restructuring charges and impairment of intangible assets in a total of USD 32.7 million
- Cash balance of USD 33.7 million
- Equity ratio at 48.1%
Myriad Group AG (SIX: MYRN), a global leader in mobile technology having shipped over 3.8 billion software applications on more than 2.2 billion phones, today reported revenues of USD 101.0 million, and underlying operating profit of USD 11.3 million for fiscal year 2010.
Simon Wilkinson, CEO of Myriad Group AG, commented: "I am pleased with our progress this year in establishing a strong, scalable platform to support the launch of high growth mobile services such as social messaging to complement our existing device software and mobile services portfolio. Our fiscal year 2010 results were impacted by the termination of the contract with Sagem Wireless. However with the timely action taken to substantially reduce the Group cost base, together with a cash balance of close to USD 34 million and an equity ratio of 48%, I believe we have a sound financial position from which to grow the business."
Revenue for fiscal year 2010 reached USD 101.0 million compared to pro forma revenue of USD 125.8 million in 2009, mainly reflecting the reduction in Sagem Wireless revenues of USD 22.9 million year-on-year. In total, Sagem Wireless revenues in 2010 amounted to USD 36.0 million.
The Device Solutions segment - which provides software and engineering services to leading manufacturers of mobile phones and other devices - reported revenue of USD 90.7 million for 2010, compared to USD 112.8 million in 2009. The decline is entirely due to lower revenues with Sagem Wireless (USD 22.9 million) in the year on year comparison. Growth in software revenues for Set Top boxes and Blu-ray players was particularly encouraging as a new and emerging market for Myriad.
The Mobile Services segment - which provides Social Network Services solutions and Self-Care services for mobile network operators - reported revenue of USD 10.3 million in 2010, compared to USD 13.0 million in 2009. Revenues and profitability of the Mobile Services Division are expected to improve significantly in 2011 reflecting an improvement in prospects for the Self-Care business and the anticipated ramp in revenues associated with the Telefónica Latam Social Network Services agreement of which the first 4 networks were integrated in March 2011.
Gross Profit was USD 67.3 million for 2010, compared to USD 86.4 million in 2009. The gross margin remained relatively stable at 66.7% despite the revenue and margin effect of Sagem Wireless, with a decline of 2 percentage points compared to fiscal year 2009.
EBITDA (before restructuring charges and extraordinary income)declined to USD 11.3 million, reflecting an EBITDA margin of 11.2%, compared to USD 25.0 million and 19.9% margin in 2009. Including the extraordinary income of USD 18.3 million (net) from the sale of IP during 2010, EBITDA pre-restructuring reached USD 29.6 million at a margin of 29.3%.
Research & Development (R&D) costs, gross, amounted to USD 32.6 million compared to USD 39.1 million in the previous year (net of capitalised costs USD 26.7 million and USD 34.6 million, respectively). Gross R&D as a percentage of revenue was 32.3% in 2010 compared with 31.1% in 2009. The reduction in R&D expenses mainly reflects the cessation of R&D associated with Sagem Wireless together with the redeployment of engineering resources from Europe to China to reduce the cost of innovation in the Group.
Sales and marketing (S&M) expenses increased to USD 13.3 million from USD 9.4 million in 2009. This investment reflects management's intention to fully exploit Myriad's rich product pipeline and global market potential. As a result S&M increased by 5.7 percentage points to 13.2% in 2010 (as a percentage of revenues).
General and administrative (G&A) expenses fell to USD 17.5 million from USD 24.0 million in 2009 with the effect of reducing G&A as a percentage of revenues by 1.8 percentage points to 17.3% despite the year on year decline in revenues. The reduction reflects successful management action to rationalise back office costs through the consolidation of Finance, IT and HR functions as well as through the closure and shrinkage of offices.
Annualised cost base approximately USD 23 million lower
Management continued its cost reduction programme to downsize the cost base of the Group. The reduction of the engineering teams and office space in Europe as well as the reduction of back office functions led to a restructuring charge of USD 7.0 million in 2010. Management estimates savings arising from this restructuring will be approximately USD 23.0 million per annum.
Amortisation and impairment of intangible assets
The amortisation of intangible assets amounted to USD 23.4 million (USD 26.9 million in 2009) and mainly reflects the amortisation of IP related to the former Cellicium, Purple Labs and Sagem Wireless 2G organisations. Myriad recorded a non-cash impairment charge of USD 25.7 million in 2010 (USD 35.5 million in 2009) to reduce the carrying value of goodwill and other intangible assets solely relating to the terminated Sagem Wireless contract within the Device Solutions Division.
Net loss for 2010 came to USD 32.9 million compared to USD 51.4 million for the previous year.
Balance sheet As a result of the one-time IP sale in July offsetting the loss of substantial advanced payments from Sagem Wireless, Myriad's liquidity remained stable and solid throughout 2010. At 31 December 2010, the balance of cash & cash equivalents, including short-term investments and marketable securities, was USD 33.7 million (USD 38.0 million at 31 December 2009). Myriad remains sufficiently capitalised and financially robust with shareholders' equity of USD 62.0 million and an equity ratio of 48.1%.
Post termination of the Sagem relationship, Myriad is still underpinned by strong recurring revenues from its core Device and Customer Care businesses. 2011 top line growth will be largely determined by the successful launch of new products and the roll out and subsequent revenues arising from Latin America with Telefónica Latam and other prospects.
Myriad's primary focus for the coming year is the roll out of the 13 territories covered by the Telefónica Social Network Services agreement. In addition to the 4 networks integrated in March 2011, Myriad expects to go live with these territories plus a further 2 additional markets in quarter 2 which will account for 75% of the total Telefónica Latam subscriber base. The remaining networks will deploy by the end of the year. Management are targeting the closure of a number of other pipeline deals to secure further Social Network Service revenues from around the world.
Whilst continuing to serve our Tier 1 device customers, management is also focussed on securing deals for new mobile products including the 'Connect and Share' and 'Alien Android' propositions, as well as the increased targeting of our portfolio into non mobile markets such as Set Top boxes and Consumer Electronics devices.
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